A tale of two economies - Earnings scorecard: Mixed so far - Yellen called slow recovery

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DRIVING THE WEEK: A TALE OF TWO ECONOMIES — Lot of big data coming this week highlighted by the first read on second quarter economic growth on Wednesday and the July jobs report on Friday. Wednesday’s number is likely to be awful, somewhere around 0.5 percent, which will doubtless generate lots of “Obama’s economy isn’t working” complaints from the GOP. Of course, the numbers will be largely driven down by big cuts in federal spending demanded by Republicans. But that’s hard to get in a headline.

The pain for the White House should be short-lived as Friday’s jobs number, more of a reflection of where the economy is now then where it was in the second quarter, should come in close to 200,000. … This would play into the administration’s argument going into the debt ceiling fight that it makes little sense to slash more spending now just when the fiscal drag on the economy is getting ready to lift somewhat, clearing the way for closer to 3 percent growth the rest of the year. But that’s not likely to mean much to House Republicans.

EARNINGS SCORECARD: MIXED SO FAR – Per Goldman Sachs analysis: “After the largest reporting week of the 2Q 2013 season, over 50 percent of the S&P 500 has now reported results. Three takeaways for this week: (1) Sales misses were more likely to be punished than previous quarters; (2) Guidance is negative but an improvement over the past year. No change to bottom-up consensus full-year estimates; and (3) Earnings and sales results are in line with the 10-year historical averages. Next week is the last major week of the 2Q season.”

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GOOD MONDAY MORNING – Hope everyone had a nice weekend. I know the Yankees are having a tough season. But seeing Derek Jeter go yard on his first pitch back was pretty sweet. http://es.pn/17NWHOY. Follow @morningmoneypro for alerts as well as other financial news from POLITICO Pro Financial Services.

DRIVING THE WEEK — President Obama is on the road again talking jobs and the economy on Tuesday at an Amazon fulfillment center in Chattanooga, Tenn. Obama goes to the Hill on Wednesday for a meeting with House and Senate Democrats on jobs and the economy and presumably the fiscal fights ahead when Congress comes back in September with a short clock before a possible shutdown at the end of the month … Pending homes sales at 10 a.m. expected to dip 1.0 percent after May’s big jump …

Case-Shiller home pries at 9 a.m. Tuesday expected to rise 1.5 percent … ADP private employment at 8:15 a.m. Wednesday expected to rise 180K … First read on Q2 GDP at 8:30 a.m. on Wednesday expected to come in at 1.0 percent … No change likely in Fed announcement on Wednesday at 2:00 p.m. … July jobs report at 8:30 a.m. on Friday expected to show a gain of 185K with unemployment unchanged at 7.6 percent … Senate Banking has a hearing at 10 a.m. on Tuesday on Dodd-Frank and monitoring systemic risk featuring SEC’s Mary Jo White and CFTC’s Gary Gensler …

LEW PRODS CONGRESS ON DEBT CEILING – POLITICO’s Burgess Everett: “Treasury Secretary Jack Lew says … Obama will not sign government funding bills that cut domestic spending and will not negotiate over the debt limit with Republicans seeking spending cuts. ‘Congress can't let us default. Congress has to do its work,’ Lew said Sunday on ABC's ‘This Week,’ … ‘I certainly hope that Congress isn't looking to create confrontations and false crises because we did see, in 2011, how bad that is for the American economy,’ Lew said. ‘The mere fact of negotiating over the debt limit, after 2011, would introduce this notion that somehow there's a question about whether or not we're going to pay our bills, whether or not we're going to protect the full faith and credit of the United States." http://politi.co/12WDV4J

THE BIG DEAL: MARKETING GIANTS MERGE — FT’s Andrew Edgecliffe-Johnson and Emily Steel in New York, Adam Thomson in Paris and Anousha Sakoui in London: “Publicis and Omnicom unveiled plans for a $35bn merger on Sunday that would reshape the global marketing industry and affect billions of dollars spent by the world’s largest brands everywhere from television networks to Google… The Franco-US deal, signed at Publicis’ Paris headquarters overlooking the Arc de Triomphe, confounded analysts and rivals who warned of client conflicts, regulatory risks and culture clashes. … The new Publicis Omnicom Group would be the world’s largest marketing group by revenues and equity value. Under a new Dutch holding company structure it would retain headquarters in Paris and New York, a primary listing in New York and a Euronext Paris listing. Publicis chief executive Maurice Lévy and Omnicom CEO John Wren plan to share power as co-CEOs for 30 months, after which Mr Levy, 71, will step up to become chairman and Mr Wren, 60, will become sole CEO.

“The two men pitched the deal as a merger of equals that would offer clients a full range of services, global reach and top creative talent at a time when traditional marketing groups face new digital rivals and clients increasingly deal direct with Silicon Valley’s largest digital platforms. … Analysts predicted that traditional rivals would also respond, forecasting follow-on deals such as an acquisition of Interpublic by WPP, which will lose its crown as the industry’s largest company, or even a merger of Havas and Vivendi, two groups in which French investor Vincent Bolloré has ownership and influence.” http://on.ft.com/12WEQSO

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MEDIA WATCH: BLOOMBERG MEDIA GETS NEW CEO — NYT’s David Carr: “Justin B. Smith, whose digital strategy swiftly transformed The Atlantic, one of the statelier media vessels around, is about to get a bigger boat. … Bloomberg [this morning announced] that Mr. Smith, the president of Atlantic Media [was] named chief executive of the Bloomberg Media Group. He will report to Daniel L. Doctoroff, chief executive of Bloomberg. Andrew Lack, who managed the media division for five years, will become chairman. … In a letter to the staff about Mr. Smith’s departure, David Bradley, the owner of Atlantic Media, credited Mr. Smith with bringing the company to profitability for the first time under his ownership; doubling revenue; and creating a number of successful digital start-ups, including The Atlantic Wire and Quartz.” http://nyti.ms/15Y4PLw

NEW THIS MORNING: DELOITTE RISK STUDY – Per Deloitte’s eighth biennial survey on risk management out this morning: “Regulatory change has resulted in 65 percent of responding institutions noticing an increased cost of compliance an increase from 55 percent in 2010. In addition, the requirements of Basel II/III and mandated stress tests have led institutions to alter their businesses by maintaining higher capital (54 percent, up from 41 percent in 2010), adjusting certain product lines and/or business activities (48 percent, up from 24 percent in 2010), and maintaining higher liquidity (37 percent, roughly the same as in 2010).” Full results live at 8 a.m.: http://bit.ly/16sgToh

HOT READ: TARULLOW DEEP DIVE — The American Banker’s Donna Borak on Federal Reserve Board Member Daniel K. Tarullo’s rise to regulatory prominence: “Tarullo met Obama in 2005. He was invited by the recently elected Illinois senator to several informal dinners, usually involving takeout in the conference room of Obama's office in the Hart Senate building. ‘We hit it off in the sense that I liked the questions he was asking, and I stayed in touch with his staff,’ Tarullo says. By the time of the Cooper Union speech, Tarullo had become an important resource for the Obama campaign's policy staff in Chicago. A full-blown financial crisis was becoming a real possibility, and the candidate wanted to weigh in substantively on the topic” http://bit.ly/14qVLMl

Danny Kedem, the young operative who joined Weiner’s campaign in late spring when the former congressman announced his candidacy, departed the effort at the end of last week … Kedem’s departure is significant less in terms of day-to-day impact — Weiner is notorious for micromanaging his own races and the team was already quite thin — than for the public-relations effect after a fresh bout of scandal. The primary is just over six weeks away” http://bit.ly/14cOVkH

ALSO DRIVING THE WEEK: MIDEAST TALKS — Reuters’ Arshad Mohammed and Ori Lewis: “Israel and the Palestinians plan to resume peace negotiations this week for the first time in nearly three years after an intense effort by U.S. Secretary of State John Kerry to bring them back to the table. The talks are scheduled to resume in Washington on Monday evening and on Tuesday and will be conducted by senior aides to Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas

… Middle East analysts voiced skepticism that the talks might lead to a peace treaty to end the more than six-decade conflict that has defied two decades of U.S. efforts to broker a solution. Still, the resumption of negotiations is a rare moment of good news in the Middle East for the Obama administration.” http://reut.rs/1cfzB7B

FED CHAIR FLY AROUND –

OBAMA ON WHAT HE WANTS IN A CHAI — Obama in an interview with NYT’s Jackie Calmes and Michael D. Shear, asked if he was close to naming Larry Summers: “I have not made a final decision. I’ve narrowed it down to some extraordinarily qualified candidates. … And what I’m looking for is somebody who understands the Fed has a dual mandate, that that’s not just lip service … And when unemployment is still too high, and long-term unemployment is still too high, and there’s still weak demand in a lot of industries …

“I want a Fed chairman that can step back and look at that objectively and say, let’s make sure that we’re growing the economy, but let’s also keep an eye on inflation, and if it starts heating up, if the markets start frothing up, let’s make sure that we’re not creating new bubbles … I think you can anticipate that over the next several months, an announcement will be made.” Full transcript: http://nyti.ms/14oFBmx

YELLEN CALLED SLOW RECOVERY — WSJ’s Jon Hilsenrath and Kristina Peterson: “As the U.S. emerged from recession in the summer of 2009, Janet Yellen, then president of the Federal Reserve Bank of San Francisco, took a grim view of the economy's prospects. ‘I expect the pace of the recovery will be frustratingly slow,’ she said in a San Francisco speech. A month later, addressing fears that money flooding into the economy from the Federal Reserve would stoke inflation, Ms. Yellen said not to worry in a speech to Idaho bankers: High unemployment and the weak economy would tamp wages and prices. … Ms. Yellen was proved right. Predicting the direction of the U.S. economy with precision is impossible. But the Fed must forecast growth, inflation and unemployment to guide its decisions on interest rates. Central bank miscalculations — when the Fed pushed interest rates too low or too high — have historically turned problems into catastrophes, fueling the Great Depression, for example, and the wealth-eroding inflation of the 1970s” http://on.wsj.com/16slNSo

ALSO FOR YOUR RADAR –

WELLS FARGO BACKS OFF COLLECTIONS — American Bankers’ Maria Aspan scoops: “Wells Fargo … has halted sales of its customers' unpaid consumer loans to outside debt collection agencies, according to several sources … The San Francisco bank's decision mirrors a more drastic pullback at JPMorgan Chase … which has frozen most of its credit card debt-sales activities. It also comes at a time when regulators are ratcheting up scrutiny of banks' collections operations.

“Wells Fargo is facing less direct pressure from regulators than is JPMorgan Chase over its credit card collections practices. However, people familiar with the bank's decision say it appears to be reviewing its operations to ensure they comply with regulators' increasingly tight standards for: the process through which banks sell defaulted credit card loans; whom they sell collections rights to; and what information they provide to third-party debt collectors” http://bit.ly/14qXrp9

ALSO TODAY: MORE TAX REFORM ROAD SHOW — Per the National Retail Federation: “Chairmen Dave Camp and Max Baucus will be in the Philadelphia-area today for their ‘Simpler Taxes for America Tour’ to discuss comprehensive tax reform with local businesses. … Retailers benefit from few of the tax breaks that other industries enjoy, so NRF is calling for the elimination of most tax credits, deductions and incentives.”

FEDS TO KEEP SAC ON LIFE SUPPORT — WSJ’s James Sterngold and Joe Palazzolo: “The U.S. government plans to negotiate an agreement to allow SAC Capital Advisors LP to continue its operations even as it faces criminal insider-trading charges and an effort by prosecutors to seize most of its assets … No agreement is in place and no terms have been set … The official added that if prosecutors felt the firm engaged in any further improper behavior, they could ‘ratchet up’ the terms of any agreement and make them more restrictive, including requiring that SAC seek advance approval of significant transactions …

The government's willingness to work with SAC contrasts with the harsh language that Preet Bharara, the U.S. attorney in Manhattan, used in announcing criminal and civil charges against SAC Thursday. He characterized the firm as ‘systematic’ in its illegal activities and ‘a veritable magnet for market cheaters.’” http://on.wsj.com/17NZXtK

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